NEW YORK–Certificates of deposit are suddenly “cool again”—at least at banks, according to one new report.
With CD rates topping 5% and with some even dangling 6% deals (with caveats), balances in CDs soared from $36.5 billion in April 2022 to $418.4 billion in January, according to the Federal Reserve data cited by the Wall Street Journal. Terms on the CDs have been in the shorter-term range, according to the report.
The average yield on a 12-month CD is 1.59%, but the top-yielding, nationally available 12-month CDs are now between 5% and 5.25% as of late last week, Greg McBride, chief financial analyst at Bankrate, told the Journal.
Capital One, Synchrony Bank and Forbright are a few of the banks offering a 5% yield for 11 to 14 months.
“Rates on CDs and savings in general have been so low for so long that plenty of savers haven’t been aware of—or had largely forgotten about—their existence,” observed the Journal, adding the Fed’s campaign to stamp out high inflation by raising interest rates has been making CDs more attractive to savers, along with similarly staid and forgotten investments such as I Bonds, government savings bonds pegged to inflation.
‘Clunky’ Process
The Journal noted that I Bonds still earn 6.89% through April 30, when the rate adjusts, but deposits are limited to $10,000 and require savers to navigate the somewhat clunky TreasuryDirect site.
Most banks and credit unions offer CDs, and allow for larger deposits and have fewer restrictions, the Journal added.
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